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June construction spending down overall, office construction up

This week, the Department of Commerce reported that overall construction spending dropped by 1.3 percent in June. This represented the second marked drop in the last three months. Moreover, spending on government construction projects fell by its largest percentage since 2002.

The previous large drop occurred in April, when spending declined by 1.8 percent. It then rebounded by 0.3 percent in May but essentially remained flat. The numbers are disappointing but perhaps not surprising, as U.S. construction spending hit a decade-long high in November.

Perhaps the most positive news for the industry is that commercial construction rose by 0.1 percent in June, following a 0.6 percent increase in May. Those gains could not overcome a 0.2-percent drop in residential construction or a hefty 5.4-percent drop in government construction spending. The reduction in spending on residential construction represented a third month of decline in that sector, according to the Courthouse News Service.

The small increase in commercial construction was accounted for by a 2.9-percent bump in spending on office construction. That offset a 0.4-percent decline in another category of non-residential construction which includes strip malls and other shopping centers.

Over the past year, however, nationwide commercial construction spending has basically been strong. In November, non-residential construction rose by 1 percent, led by a 7-percent leap in construction spending on motels and hotels. Moreover, federal, state and local government construction activity increased by 0.08 percent.

Overall construction spending in November rose by 0.9 percent to a seasonally adjusted annual rate of $1.18 trillion. The last time the spending rate was so high, it should be noted, was at the height of the housing boom in April 2006.

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